Steel and Tech stocks Diverge

123jump.com Staff
06 Feb, 2006
New York City

Market averages barely budged today but tech stocks was another story. Sharp fall in Apple stock led tech decline in tech stocks. Nervous traders worried that Apple earnigs growth may have peaked in the short-term. Steel stocks rose in most markets around the world as Arcelor is reported to acquire U.S. Steel. Oil fell but traded near elevated level.

U.S. MARKET AVERAGES

Oil, steel and tech stocks pulled market in different directions.

Oil fell but traded near elevated levels on jitters of brewing conflict in the Middle-east. The cooling of stand-off between Iran and United Nation’s nuclear watch agency led oil to drop but not much. The gas crisis caused by Russia’s gas blockade and now Iran’s perceived threat to curtail oil flow all played in keeping oil and gas traders nervous in the U.S. and in Europe.

Steel stocks saw another day of gains as Arcelor, European steel maker, is reported to acquire U.S. Steel ((X)) to ward-off it from being acquired by hostile bid from Mittal Steel ((MT)). The chain reaction was set-off in the steel industry last week when Mittal announced surprise bid to acquire Arcelor for $23.8 billion. The long expected consolidation in the steel industry is finally happening at a furious pace around the world. Steel makers in Japan, Korea, Canada, Brazil and the U.S. are in merger talks to gain market share in a very fragmented industry. Several steel stocks rose in the U.S., Brazil, Japan, and in Europe today.

Tech stocks took another beating as Apple Computer faced heavy selling. The stock fell $4.55 to $67.30 wiping out the entire gain for the year. Several traders suggested that current Apple share price reflects the optimistic growth outlook for the company and the stock price leaves little room for disappointment from the company’s performance.

Bond traders were faced with reports that Fed is likely to raise interest rates two more times in the coming months. Recent employment reports suggested a strong job creation and wage pressures may be building in several key industries. Yield on ten-year long bond rose to 4.545% and 30-year long bond rose to 4.625%.


MOVERS AND SHAKERS

Alcoa ((AA)) was upgraded at J.P. Morgan to overweight from neutral. The broker cited strong aluminum prices and the impact it will have on the company's earnings and cash flow in 2006. The stock rose 4.1%.

Micron Technology ((MU)) was upgraded to buy at Citigroup. The firm also lifted its price target on the stock to $21 from $15. The stock gained 4.6%.

Blue Coat Systems ((BCS)), Internet security company, cut its Q3 earnings outlook, placing it below analyst estimates. The company said it expects to earn $2.1 to $2.7 million in the quarter, or 14 to 18 cents on a per-share basis on revenue of $34.5 to $35.1 million. The average estimate of analysts is for earnings of 35 cents a share and revenue of $38.9 million. The company’s shares slid 34%.

Talbots Inc ((TLB)) agreed to acquire J.Jill Group Inc ((JILL)) for $24.05 per share in cash, or about $517 million. Talbots will finance the deal with a new $400 million credit facility and cash on hand. The transaction is expected to add to Talbots earnings in fiscal 2007. J. Jill will continue to operate under its name. The company’s stock fell 3.6%.

NetBank ((NTBK)) reported Q4 net income of $895,000, or 2 cents a share, reversing a loss of $17.7 million, or 38 cents a share a year ago, meeting analyst expectations. NetBank also said it expects lower Q1first-quarter results with estimates ranging from a loss of 1 cent to earnings of 8 cents a share. The bank’s shares dropped 4.5%.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks reversed from morning weakness to rally in the afternoon, posting solid gains despite higher oil prices, pushed up by escalating tension in the Middle East. The leading gainer was Shanghai Composite, surging to 2.35% after an extended holiday. The Nikkei hit a fresh 5 ½-year high rising 0.53% to 16,747.76 on strong economic data. Among other regional markets, Taiwan’s weighted index climbed 1.9%, Hong Kong’s Hang Seng rose 0.6%, and South Korea’s Kospi gained 0.6%.

European stocks closed in the green as bid speculations in the bank sector offset some mixed corporate news. The gainers were led by the Italian MIB 30 which surged 1.2%. The German DAX 30 gained 0.2% and London’s FTSE 100 advanced 0.3%.

OIL, METALS, CURRENCIES

Crude oil prices advanced amid renewed political tension over Iran’s nuclear program. Light sweet crude for March delivery dropped 26 cents to $65.11 a barrel. Heating oil dropped 3 cent to $1.7628 a gallon, while gasoline fell 4 cents to $1.6442. Natural gas dropped 61 cents to $7.995 per 1,000 cubic feet. London Brent rose 41 cents to $63.80.

European gold prices advanced. In London gold traded at the fixed price of $572.80 bid per troy ounce, up from $569. In Zurich the precious metal traded at $573.10, up from $568.50. In Hong Kong gold fell $2.90 to close at $570. Silver closed at $9.83, up from $9.74. In New York gold rose $2.70 to close at $574.30.

The U.S. dollar strengthened against most other major currencies. The euro was quoted at $1.9979, down from $1.2022. The dollar bought 118.81 yen, down from $118.93. The British pound stood at $1.7509, down from $1.7613.

EARNINGS NEWS

Temple Inland Inc, ((TIN)), wood products and financial services company, reported Q4 net income of 21 cents a share, down from 46 cents a share in the year-ago period, missing analyst views for earnings of 27 cents a share. The company announced that the figure excluded 9 cents share in special items and included 2 cents a share in discontinued items.

Louisiana-Pacific Corp, ((LPX)), maker of building materials, reported Q4 net income of 80 cents a share, more than six times better than the year-ago profit of12 cents a share, beating analyst estimate of 65 cents a share. The company announced its income from operations was 86 cents a share in the Q4 of 2005.

NeuStar Inc, ((NSR)), provider of clearinghouse services reported that Q4 net income more than tripled to 18 cents a share, up from 5 cents a share in the year-earlier period on 53.1% revenue growth, driven mainly by an increase in transactions under contracts to ensure telephone number portability services.

Ipsco Inc, ((IPS)), steelmaker, reported Q4 net income of $3.52 a share, down from $3.91 a share in the year-ago period, beating analyst estimate of $2.84 a share. Currency translations subtracted 15 cents a share from earnings in Q4, and costs of early debt retirement also had its bearing on earnings by another 9 cents a share. Additionally, a lower effective tax rate contributed 62 cents to earnings. Gross margin narrowed to 30.3% from 35.5%, due to higher costs for alloys, energy and consumables.

Humana Inc., ((HUM)), health benefits company, reported a 37% increase in Q4 net profit to 39 cents a share on 14% revenue growth due to a significant increase in Medicare business. If not for 7 cents a share, in Hurricane Katrina-related expenses, the company announced it would have earned 46 cents a share, beating analysts’ forecasts by a penny.

Serono, ((SRA)), biotech company, announced Q4 adjusted net income soared 72.2% to 25 cents per U.S.-listed share, despite 1.4% revenue decline. The company’s profit climbed on a fall in selling, general and administrative expenses as well as a decrease in research and developments costs. Serono plans to raise its annual dividend by 11.1%.

CORPORATE NEWS

Japanese electronics maker Toshiba Corp. said it was buying nuclear plant builder Westinghouse Electric Co. for $5.4 billion. The company will acquire 100% of Westinghouse, but it was in talks with other U.S. and Japanese companies to take a minority stake. Toshiba will retain over 51% to be the con trolling shareholder.